As long as the pie is increasing in size, people can tolerate getting a proportionally smaller slice. If the pie stops growing, that becomes untenable.
I think the answer is somewhere in wealth taxes, which are much harder to implement effectively than income taxes, but will be necessary for redistribution in a world with static or declining incomes.
To put that into context with population pyramids, to support the old people, young people will need to get a bigger slice of the pie. That means less wealth being locked into untaxed distribution schemes that pass down generationally, whether it's trusts or corporations.
In every society where some people are working ("the young") and some people are not ("the old"), and everybody is consuming, the young people have to work for the old. There is no way around that. There are not much goods or services that you can store for more than a year. They young always have to do the work. You can think of different schemes how you transfer the buying power to the old (taxes, dividends, interests, rent, ...) but in the end of the day, some are working, some are not and the young always have to do the work for the old.
Productivity has been rising decade after decade - the younger generation produces more than enough to sustain even a larger older generation. Much of that wealth production is re-routed to those at the top of the wealth pyramid. Moving even some of that back downwards would do a lot to resolve these problems.
This is a consequence of an increasing labor force. If productivity rises but there are more workers available than are necessary to produce the goods demanded, the price for labor will fall, and all of the gains of this productivity will be accrued by capital. If there are fewer workers available than are needed to man the machines, the wages paid to those workers will increase, and all the productivity gains will be captured by labor.
The plight of the American worker tracks very well with how many of them there are (modulo globalization, which makes the plight of the worker track with how many there are globally). The golden years of the 1950s coincided with the depopulation and destruction of capital stock following WW2; this made America the only country that still had productive industry, which brought in a good deal of global money that could be shared with the G.I. and Silent generations. 70s stagflation and 80s malaise coincided with the entry of baby boomers into the workforce and household-forming years: with more laborers, wages fell, and with more consumers for a fixed number of goods, prices rose. The late 80s recovery and 90s boom coincided with Gen-X and the retirement of the G.I. Generation: with few incoming workers and lots of outgoing ones, wages rose. The post-2000 malaise coincides with the entry of Millenials into the workforce: the world population has grown from 4.5 billion in the early 80s to 7.7 billion today, and all those young people are entering the workforce now.
It's likely that as the Boomers die off and the Homelander generation (post-2001 & tiny) enters the workforce, wages will rise naturally and capital prices will fall significantly.
It's important to keep in mind that the older generation that needs to be supported right now and the generations before had plenty of kids and the problem does not exist at the moment - it's more about what happens if the trends holds and the generations that are at well below replacement rates start retiring.
Also, most of the wealth held by the top of the wealth pyramid is not what has already been produced, but merely claims on future production. I doubt people at the top of the wealth pyramid consume all that much as a fraction of the society's productive capacity - either they are holding onto existing claims or creating new claims by making investments that would increase the future productive capacity.
So if there was a production gap and the youth is not able to support the older generation due to the lack of productive capacity, moving the wealth downwards would exacerbate the gap, because you'd be redirecting some of the productive capacity towards consumption rather than investment.
Wealth governs the distribution of product, not the quantity of product. Reassign 100% of the wealth of the infirm to the able, and discover that the labor of the able does not change.
>but in the end of the day, some are working, some are not and the young always have to do the work for the old.
Well, we're forgetting the very young (0-18) who the older work for them, to house, nurture, feed, educate, and usually spoil them...
So there's that. It's not like the young come from nowhere and suddenly have some responsibility to work for the old when nobody never did anything for them...
>This is not about responsibility or morale, but just about the pure economics of life.
Well, the "pure economics of life" for humans include that for human life to be sustainable, we should tend to the young (for a culturally adjusted 18 years or so), and that we should tend to the older (65+) too.
Being framed as a "ponzi scheme" targeting the young at the point they enter the workplace, hides that fact that a lots of money and parental energy (and even more time unaccounted for as money) were given to said young before that point...
It's not exactly a "ponzi scheme" if Ponzi and his money, time, and effort is the only reason you're alive and working now...
That only exacerbates the fundamental problem: smaller working cohort, larger dependant cohort.
Resource consumption per capita of youth is less than elderly (especially healthcare), and generally reduces with time (excepting education). Youth lasts only 15-20 years before gainful employment can begin. Old age stretches from 65 onwards. Early retirees may spend 50 years or more "retired".
Which with average life expectancy is close to 15-20 years of remaining life. E.g tons don't make it to 70 even.
>Early retirees may spend 50 years or more "retired"
Early retirees are usually people who saved money / hit the business jackpot, not people who expect some others to work to pay them a pension.
We're also forgetting that (at least in civilized pension systems) retirees at 65 had 30-40 years of paying taxes (along with the employers part) for their pension scheme.
Well that's if you don't increase efficacy which we are well on our way of doing. This doesn't strike me as such a large issue since "the old" are still consuming and therefore spending capital. Automation and efficacy increase (through tech) will more then make up for the population discrepancies as long as there is enough capital to warrant the investment.
They are consuming, but nowhere near enough to spread the wealth around. And the wealthy vote themselves laws that let them keep more of their unearned wealth.
Look at what’s happened to California under prop 13 [1]. What was supposed to protect little old ladies from losing their homes due to rising property taxes has turned into a commercial real estate bonanza. People are making money hand over fist renting rooms at exorbitant prices to young people, and paying next to nothing in property taxes for the privilege. Meanwhile, a young person needs a large six to seven figure income just to afford a home in the Bay Area, and then their property taxes are insanely high, forcing them to subsidize their commercial real estate neighbours. It’s ridiculously unfair.
Speaking as someone who recently was finally able to buy in the Bay Area, repealing prop 13 would screw everyone in my position and do nothing to make real estate more available.
I agree that it is ‘unfair’ but making it more ‘fair’ would just harm all the people who have actually made it work for them.
Most people who own property in the Bay Area are not predatory landlords.
> Speaking as someone who recently was finally able to buy in the Bay Area, repealing prop 13 would screw everyone in my position
No it wouldn't; if you've recently brought, your property taxes would go down. What it would mean is that the people who bought in the '80s who would have to step up so that you both paid the same, rather than you carrying them.
> and do nothing to make real estate more available.
Of course it would: it would force a lot of people (particularly older non-working people) to sell up, making a lot more housing available to those who have a greater need/desire to live there now but aren't fortunate enough to have moved in decades ago.
> I agree that it is ‘unfair’ but making it more ‘fair’ would just harm all the people who have actually made it work for them.
The first-order effect would be zero-sum, but the current market distortion leads to inefficient allocation at second order. So levelling the playing field would be a net gain.
> Most people who own property in the Bay Area are not predatory landlords.
People who benefit from prop 13 are at best getting an unearned windfall.
> Why would property taxes go down? The property value has gone up.
Assuming we want the total tax take to stay the same (changing that is a separate question), people who currently have a higher-than-average tax:property value ratio (which is people who bought recently) would have their tax bill go down (and people who currently have a lower-than-average tax:property value ratio would have their tax bill go up).
> At least you are being honest that the goal here is to force people out of their homes so that people with tech jobs can buy them.
In the same sense that other people are currently "forced" to rent forever and pay extra taxes to support idle homeowners, sure. Saying that I'm not allowed to own a house in San Francisco is just as cruel as saying that you're not allowed to own a house in San Francisco, whether or not you happen to have lived there for some number of years already.
> But of course nobody is saying this because nobody took anything years ago.
> They bought it from someone who wanted to sell it to them.
I'm not proposing to take anyone else's house either. They are more than welcome to keep their house (as long as they keep paying their fair share of taxes, obeying the law, and doing all the other things that we expect of decent citizens). They still have a free choice over whether to sell their house or not. Once we remove the unfair subsidy they get because they happened to buy it a long time ago, a lot of them are likely to decide that the house is worth less to them than what they could sell it for, that's all.
> I am not saying you should pay twice as much property tax as someone living in an equally valuable house.
> I am saying that increasing property taxes as prices go up is confiscatory and immoral.
How do you reconcile those two statements? If you're saying that people should be taxed based on the price they purchased that then you're saying exactly that I should pay twice as much as certain other people living in houses that have the same value. Of course property prices change; taxing everyone based on their current house value is equitable and nondiscriminatory. Taxing based on the price when they happened to buy is neither.
> I am saying that anyone who wants to use this mechanism to displace people so that they can acquire their property is a thief.
We live in a society, it's everyone's responsibility to pay their taxes. The thieves are the people who want to avoid paying their fair share so that they can keep living above their means.
> If the city needs to raise revenue it should be via income, or a per person charge for services. Other countries do this and it works just fine.
They do not work "just fine". Poll taxes are immensely regressive. Income taxes disincentivize productive work. Land is the one thing we can't produce more of when prices rise - those hoarding it should absolutely be shouldering a corresponding tax bill.
Land prices rise as a result of people wanting to buy the land and competing with other people with means to buy it.
You are proposing that the taxes of someone who owns a house should be based on the ability of other people to buy it.
Nothing could be more regressive than that. It is absolutely discriminatory and in no way equitable.
Living in the house you bought for yourself is clearly not ‘hoarding’. It seems like you are getting emotional now.
There is nothing discriminatory about basing taxes on the purchase price. If you buy now, you will benefit from prop 13 the same as anyone else.
Also, using taxes to force people out of their houses as you propose, is a terrible idea for the development of the economy since it disincentivizes the development of productive industry in other less developed areas.
> You are proposing that the taxes of someone who owns a house should be based on the ability of other people to buy it.
> Nothing could be more regressive than that. It is absolutely discriminatory and in no way equitable.
How so? The tax rate on a given house should be independent of who is living in it. Two people living in identical houses (in equivalent locations) should be paying identical taxes. That's obviously the fair approach.
> Living in the house you bought for yourself is clearly not ‘hoarding’.
It easily can be, if you're living in a bigger house than you need, or living in a prime job area when you're not working. Hoarding always means keeping hold of something you bought for yourself so there's no contradiction there.
> There is nothing discriminatory about basing taxes on the purchase price. If you buy now, you will benefit from prop 13 the same as anyone else.
I didn't have the opportunity to buy 40 years ago because I wasn't alive then. I didn't have the opportunity to buy 10 years ago because my parents weren't rich enough to pay my deposit. Prop 13 is very much age/class discrimination in practice.
> is a terrible idea for the development of the economy since it disincentivizes the development of productive industry in other less developed areas.
Subsidising development in cheap areas is just as distortionary and counterproductive as subsidizing development in expensive areas. The best taxes - and land value tax is well known among economists as the perfect tax - don't distort in either direction, leaving the free market to get on with efficient allocation.
The tax rate on the house being proportional to what other people would like to pay for it now vs what you actually paid is clearly discriminatory.
“If you are living in a bigger house than you ‘need’ or if you are living in a prime job area and not working”
I see, so you have decided that homes should temporarily allocated to those who are working in the area, and should be sized according to a political opinion about what they ‘need’.
A segregated society where we have worker only zones and industry is more and more concentrated in the places it is already established is a grotesque, quasi-fascist dystopia.
This is what you are advocating for? At least your position is consistent.
If you buy now, over time you will benefit from prop 13 in the same way that everyone else has. In 40 years you’ll have the benefit that people who bought 40 years ago now have.
> The tax rate on the house being proportional to what other people would like to pay for it now vs what you actually paid is clearly discriminatory.
How is it discriminatory? It has nothing to do with who you are (indeed one doesn't have to know anything about you to figure it out), which is the opposite of discriminatory.
> I see, so you have decided that homes should temporarily allocated to those who are working in the area, and should be sized according to a political opinion about what they ‘need’.
Better that than allocating them by whoever first called dibs. There's a reason we believe most goods should be brought and sold at a market price that's the same for everyone, not different prices for different people.
Do you acknowledge that there's such a thing as a luxury home? I would rather people who just want somewhere to live near where they work had a level playing field with people who want to live in a mansion they don't need. (I'm not even arguing for favouring the workers, just for stopping subsidising the mansion-owners). There's nothing wrong with spending your honestly-earned money on luxuries, but you shouldn't get a tax break for it, particularly when your luxury is someone else's necessity.
> A segregated society where we have worker only zones and industry is more and more concentrated in the places it is already established is a grotesque, quasi-fascist dystopia.
A society where people can't move into the places where the jobs are is far more all of those things (not being able to move freely was one of the biggest criticisms of the Soviet Union; we called ourselves a free country in contrast, precisely because people were free to move wherever they wanted) - and that's what we have at the moment by subsidising the lucky few who happen to live in those places at present.
> If you buy now, over time you will benefit from prop 13 in the same way that everyone else has. In 40 years you’ll have the benefit that people who bought 40 years ago now have.
By that logic it's fine to refuse to hire over-50s because 30 years ago they had the same benefit that people who are currently 20 have. But actually we still consider that age discrimination, because it is.
No the age discrimination analog is flawed - you are just failing to recognize that people who benefitted from buying 40 years ago are benefiting from 40 years of holding an investment.
You are free to benefit in exactly the same way, and just like any investment it will take 40 years to reap.
40 years ago these people were in the same position as you are. There is no difference.
As to defending the allocation of housing to workers and displacement of the non-working, I applaud you for being honest about your position.
Of course you use a false dichotomy.
People are in fact free to move wherever they want. They just can’t force others out of their homes because they think they deserve them more.
If it is not economical for more workers to come to where the jobs are, then the jobs will come to the workers because corporations need to expand.
You have the same opportunity as those 40 years ago did - go and live somewhere that is cheaper and where industry is going to develop because the economic conditions are right.
That way you too can benefit from economic growth over the next 40 years the way the people you envy have.
> you are just failing to recognize that people who benefitted from buying 40 years ago are benefiting from 40 years of holding an investment.
No, that's in addition. No-one is saying that if someone bought a $400k house for $50k 40 years ago they should have to pay back the unearned $350k; they get to keep their investment gains and be just as well off as someone who buys a $400k house today. They just shouldn't get an extra tax break on top of that.
> People are in fact free to move wherever they want. They just can’t force others out of their homes because they think they deserve them more.
If charging a market price is "force" then people are being forced to not move to places where they want. Again, the mechanism that would move people out is exactly the same mechanism that currently stops other people moving in.
> You have the same opportunity as those 40 years ago did - go and live somewhere that is cheaper and where industry is going to develop because the economic conditions are right.
That's the opposite of what happened. 40 years ago those people moved into the very centre of the city, not to somewhere cheap. And they had that opportunity because the city wasn't filled up with 40 years' worth of moochers with tax breaks.
People moved in to the center of the city not because it was filled with ‘moochers’, but because people wanted to sell their homes.
Why? Because the city wasn’t considered attractive because the economy hadn’t created a huge demand for housing and a lot of rich people to compete for it.
It wasn’t tax breaks that made the city cheap. It was that the tech boom hadn’t happened yet.
If you )o somewhere where the economic growth is at an earlier stage, and you can benefit in the same way, while helping to improve the economic health of the country.
> People moved in to the center of the city not because it was filled with ‘moochers’
It wasn't filled with moochers then, it is now. That's my point.
> It wasn’t tax breaks that made the city cheap. It was that the tech boom hadn’t happened yet.
SF wasn't especially cheap, and in any case there's nothing particularly virtuous about moving in or out of somewhere at fair market price (if you move somewhere because it's cheap, you already got your reward for that: it was cheap). The people who happened to move in at a particular time got lucky that the tech boom happened to happen in a particular place, and raked in a massive unearned windfall on their property values. But apparently that isn't enough for them; they continue to massively underpay their property taxes as well.
> If you )o somewhere where the economic growth is at an earlier stage, and you can benefit in the same way, while helping to improve the economic health of the country.
I can benefit from house prices going up as they normally do, sure. I probably can't benefit from a substantial extra subsidy to my property taxes on top of that, because most of the country (rightly) does not have a Prop 13.
Anyone who underpays their property taxes ends up with a lien on their property.
If you want to benefit from prop 13 you can buy in California, just like anyone else can.
When you describe the rise in property prices as a result of the tech boom as an ‘unearned windfall’, it sounds like you are opposed to the appreciation of assets altogether.
> Anyone who underpays their property taxes ends up with a lien on their property.
Not in the age of Prop 13, sadly.
> When you describe the rise in property prices as a result of the tech boom as an ‘unearned windfall’, it sounds like you are opposed to the appreciation of assets altogether.
It's not a question of opposed or not. Sometimes some people get lucky and others don't, that's a fact of life. Houses appreciating at a normal rate is one thing, but SF has gone up massively, and the vast majority of those who benefited from that didn't do anything smart or virtuous to earn it, they just happened to pick a city that happened to become a lot more valuable. (Maybe some people genuinely did economic analysis and decided that SF was a smart place to invest in, but realistically they're a tiny minority).
All of which is fine. Some people picked one city and their houses have gone up 4x, others picked another city and their houses have gone up 10x, even though neither group of people worked more or less hard or are more or less deserving. That's life, that's fine. But we shouldn't be giving a tax subsidy to the people who were already lucky enough to have their houses go up 10x. (Indeed, if anyone should get a discount on their property taxes, it should be people whose land values haven't gone up much - the ones who've been unlucky).
> What would count as ‘earned’ in your estimation?
Labour income. Things that require active involvement. It's fairly standard terminology, no?
Corrections are part of any economy with a boom/bust cycle. Things are good for you, bad for us now. Repealing P13 would reverse that dynamic. Hopefully we regress to a livable and sustainable mean.
You make the assumption that I’m some kind of boomer who’s somehow benefitted from buying decades ago.
Repealing prop 13 in order to take peoples homes away through confiscatory taxation so that people with high incomes can buy them is not a correction. It is theft.
Why not work somewhere else where you can afford a home? That is the real ‘correction’.
You own a home. Your housing payments aren't being thrown into a void.
>Repealing prop 13 in order to take peoples homes away through confiscatory taxation so that people with high incomes can buy them is not a correction. It is theft.
So is rent-seeking, if we have such a low bar for "theft." Really, it's just society deciding where its priorities lay: people who need housing for practical reasons, or the people privileged enough to use their housing as an investment vehicle?
>Why not work somewhere else where you can afford a home? That is the real ‘correction’.
Now you're getting emotional. That's not a market correction at all.
Market corrections are about supply and demand being balanced.
There is nothing emotional about suggesting that people choose to live and work in places they can afford to.
The solution to the Bay Area housing crisis is for employers to establish operations in places where housing is cheaper - not for housing to be confiscated from earlier purchasers through confiscatory taxation.
>The solution to the Bay Area housing crisis is for employers to establish operations in places where housing is cheaper - not for housing to be confiscated from earlier purchasers through confiscatory taxation.
It's actually both.
>There is nothing emotional about suggesting that people choose to live and work in places they can afford to.
It is, within context. The proposal in question might have a net negative outcome for you, but be positive for the community. Further, while the status quo has full-time workers living on the street, readjusting this regulation and allowing a market correction to take place would presumably not ruin you, but simply force you to move. (Hey, you suggested it for others, should be good enough for you too.) In the end, though, you're against something that would ultimately be a boon for the area and is at least tenable for you. That's an emotional argument.
The fact that I disagree with you doesn’t make my argument emotional.
I did not suggest forcing anyone to move. I suggest that if you cannot afford a home, you should go somewhere you can, rather than stealing homes from people who have bought them already through confiscatory taxation.
There is no reason why people need to be displaced from their homes if jobs are created elsewhere.
If people in full time employment are unable to afford housing, they are being paid too little, and should not have accepted the job, thus forcing employers to offer more.
You have stated that you think people should be driven out of their homes even if work can be moved elsewhere. (“The solution is both”).
That seems pretty reprehensible, and I’m curious why you think it?
Forget about money for a moment, think of just physical world.
The point is, the young would have a higher quality of life if they did not have to support the old. If one young person has to support two old, their quality of life will decline no matter what the fiscal arrangements are. Sure, technology improves efficiency, but not 300%
That's a bold claim, which industrial process apart from computing and lighting has efficiency improving anywhere near 300%?
Gains have been marginal in air travel,, oil extraction, heating, steel, food and concrete production. Many of these are near the physical limits of possible efficiency.
No, obviously not. But the point is that there is plenty of productivity to go around—the benefits of it just aren't available to most people.
So, if we were to reduce the ability of the people at the very top to siphon away 99% of the productivity gains we've seen over the past 40 years, we would have more than enough food, clothing, and shelter for everyone, with enough margin that people could also work shorter hours without losing the ability to provide for everyone.
The cost of that is that a very small percentage of the population can no longer have massively extravagant lifestyles.
>The point is, the young would have a higher quality of life if they did not have to support the old.
The older two, if they didn't have to support the young, e.g. not have babies, or just send them to work on farms at 6 years old...
Are the "young" supposed to get raised for free from 0 to 18 or even 0-25 or more in these days, and then coast along, with no responsibility of paying back to society for that?
This is not a moral statement, it's a matter of physical difficulty:
If you have 4 siblings, supporting your ageing parents is quite easy
If you are a single child, supporting two ageing parents can be challenging
If you alone had to support 4 ageing people (like someone who decided not to have kids), while also having to meet your work commitments, that would probably be very difficult.
> In every society where some people are working ("the young") and some people are not ("the old"), and everybody is consuming, the young people have to work for the old.
You are missing one big thing: productivity increasing. Since I'm born in 1988, the GDP of my country (France) doubled (adjusted for inflation), assuming GDP is not totally meaninglessness, that means that we need much less «young» to sustain the entire society with the standard of living we had in 1988 (which was a pretty decent one by all standards).
> There are not much goods or services that you can store for more than a year.
That argument might have seemed less ridiculous before the invention of money. It's this amazing thing: a medium of exchange that can be stored indefinitely and then used to purchase almost any good or service. Quite a few people even tout money as the solution to every problem of incentives or matching supply to demand, though I think that's taking the idea a bit too far.
Money, or for that matter nearly all wealth, are claims on future production - for these claims to be worth something, others have to work. Money and other financial assets can solve a problem for yourself because the rest of the society would then effectively owe you part of what it produces but the value of these claims is contingent on the production.
In the real economy, what matters is production, investment and consumption - money is just a social construct designed to incentivize people to do consume/invest/produce the right amounts of the right things.
That's all well and good, but it's also a complete diversion from the original "not much goods or services that you can store for more than a year" point. If I wanted to get into a more general discussion of the efficient market hypothesis, I wouldn't do it on HN.
I am talking about that exact point - "not much goods or services that you can store for more than a year" and elaborating why that is an important thing to understand. The point of the GP was that the goods and services consumed by those that don't work have to be provided by those that do. A lot of people don't understand this because individuals can save through money and other financial instruments almost as though they are storing goods and services that can be consumed in the future.
But this analogy fails at a larger scale - an entire generation can't just save up enough while they work and expect to be provided for in retirement because what they saved up are just claims on future production - their consumption still has to come from the production provided by future generations. Their claims cannot and will not automatically cause the excess production to occur.
Now this is a purely hypothetical problem and we're arguably in a world with the opposite problem (too much productive capacity, too many people trying to save and not enough demand). Though arguably even this problem is due to too many people to save up to prepare for the other scenario, decades before it happens.
Farmer A produces 10 tons of grains and sells them for $100 each. One year later Farmer A buys a new tractor and produces 20 tons of grains and sells them for $50 because of fierce competition. People decide to save $50 instead and the farmer still sells only 10 tons. 10 ton grains have spoiled because no one bought them. 10 years later people have grown old and use their savings to buy grains. The population is growing so demand is growing as well.
Farmer A says I only have 10 tons of grains but 20 buyers are coming to my farm. If I raise my prices to $100 then I can still sell all 10 tons because a lot of people have saved up money. The end result? Some people have no grains and others have to pay through the nose because 100 tons of perfectly good grains that could have been sold have spoiled instead.
How can we model the spoilage of goods and therefore of the loss of value of money that represents a claim to these goods? With inflation. How can we encourage manufacturers to maintain production capacity even in the future? With inflation.
Actually, it's the idea that money solves the problem that is the deceptively ridiculous idea. It confuses the monetary economy for the real economy, which is, confusingly, one of the most widespread popular illusions and false popular beliefs in a modern economy.
Its a religion complete with large structures to worship. In stead of observing links in a chain we pretend it is only finance that makes things happen.
The idea seems that if one has coupons there will always be a sucker to do the work for you, in exchange for the coupons. There will eventually be a final sucker holding onto the coupons: No fiat-currency ever survived.
I always wondered, why not a stronger inheritance tax instead of a wealth tax? It would seemingly accomplish the same thing but seems fairer since the heirs didn’t earn the money in the first place.
To head off the main critique. I think either tax could be equally gamed by the rich.
I don’t necessarily support either but I’ve been wondering why Inheritance taxes aren’t really being considered.
There was an interesting example of this when I took a course modern Middle East history in college.
I forget the exact time period, but basically in pre-modern times Islamic law said that you weren't allowed to pass wealth onto your children. To get around this, the wealthy would found charities and give their kids cushy jobs running them. Even though a lot of the charity's money was presumably routed to giving the kids a lavish lifestyle, this system still resulted in the Middle East having the best social welfare system of the time period.
> To head off the main critique. I think either tax could be equally gamed by the rich.
That is not the main critique. The main critique (IMO at least) is that people earn money to, among other things, give it to their children. Taxing that is, in some people's view of the world, a) a disincentive to work and b) morally wrong.
It is incompatible with our human rights to eliminate inherited fortunes. The only way we can achieve that goal is by separating children from their parents from birth and letting them live in randomly chosen boarding schools until they become adults and even then we must forbid them from ever meeting their parents lest they inherit an unfair advantage. There is also a technical limitation: Children always inherit the DNA of their parents so even with the utmost care it is inherently impossible to correct this injustice.
By the way there is a reason why my answer is so extreme: inheritance starts as soon as you are born, not just when your parents die
Australia is an interesting example of the politics of inheritance taxes. We used to have them until a conservative state government abolished them in 1978, which triggered a race to the bottom – abolition in all other states. It’s easier to move states than countries, especially if you have no job or children in school, and the federal government does not have the constitutional authority to impose an inheritance tax of its own. The abolition campaign was assisted by using the term “death duties” and framing the tax as a punishment for those grieving the loss of a family member. I think the idea is still extremely unpopular as a result.
I would love an inheritance tax. Even a 100% inheritance tax, on anything more than zero dollars.
Of course I don't really stand to inherit anything significant, so it's super easy for me to support.
Inheritance is one of those areas where people's values and what they'd support in practice tend to diverge, according to their incentives. (Same goes for California Proposition 13, incidentally).
It seems a very anti-human thing to say that what you have worked for your whole life, that you've already paid tax on all along the way, cannot be given to your own offspring.
It strikes at the heart of what it is to be alive, and the relationship of the individual and the state.
What we need is an inheritance tax on all of the wealth that people didn’t work for. Unearned wealth in the form of real estate and capital appreciation. It’s fine for the hard-working middle class person to pass on their hard-earned home to their child. It’s not so fine if the house has gone up in value 10000% since the time they purchased it.
I don't get it. If you problem is too low capital gains taxes then just say that outright instead of hiding behind an inheritance tax that doesn't even achieve your goals.
There's a big difference between putting your money on the line with a startup you founded and just having the house you live in appreciate over several decades.
As a human, this doesn’t resonate with me at all. I know that many people disagree with inheritance taxes, but I would prefer if my views weren’t characterised as inhuman, since they are motivated by a desire to help people who inherit nothing.
You are talking about trying to interpose in the passing of the fruits of one's labours over a lifetime to one's offspring. Trying to do the best for your offspring is a very deep drive and, while one can make perfectly good logical and cerebral arguments against inheritance at a societal level, you're going to run up against deep and very natural human (and animal) feelings.
You can ask people to transcend those, but don't be surprised when you find people object on an emotional level.
And the level of state ownership of the individual that such a tax implies is very uncomfortable too. I am happy to contribute to the state, but it neither owns me, nor is more important than my own family.
It’s strange that people seem to have assumed that I want to confiscate all inheritances. I just think inheritance taxes should form some part of an efficient and fair tax system, as they do in many countries, but not mine. Do you feel that inheritance taxation implies a greater form of “state ownership” than the compulsory taxes on labour imposed during your lifetime? For me, it feels like the opposite.
> It’s strange that people seem to have assumed that I want to confiscate all inheritances.
Not really in the context of the post I replied to up-thread -
> "I would love an inheritance tax. Even a 100% inheritance tax, on anything more than zero dollars"
I know that wasn't you, but the subject of 100% inheritance tax was definitely raised.
> Do you feel that inheritance taxation implies a greater form of “state ownership” than the compulsory taxes on labour imposed during your lifetime?
Yes, very much. I pay my way during my life, but what I build with what's left should be mine to disperse to my heirs, if any.
I'm not completely opposed to all inheritance taxes either, I think there's probably a balance somewhere, and it's in society's interest to (for example) break multi-generational acquisition of vast amounts of land that result in effective aristocracy.
>if my views weren’t characterised as inhuman, since they are motivated by a desire to help people who inherit nothing.
Is this some kind of joke? Who on earth inherits nothing? You've received a body and genetic material from your parents. You have inherited a geographic location from your parents. You have most likely inherited food from your parents. You have most likely inherited an education from your parents. Your parents have passed on so many things onto you before they have died and you call that nothing? Your views are clearly inhuman because they are considering some sort of pseudo life form that exists in a vacuum with no support from anything. The reality is that you start inheriting things from your parents the moment you are born.
If you are truly worried about someone inheriting money while others get nothing why are you complaining about something that usually happens when people are in their 40s and 50s and have already received a substantial advantage from their parents during childhood? You can't undo that injustice after the fact. It's too late, the rich kids who are now middle aged are already ahead of you with 100% inheritance tax or without.
If all of those things are “inheritance,” I’m talking about something more specific – the legal process of reassigning the property rights of deceased people. The state is necessarily involved in this, since it defines and enforces property rights. Different states have different policies ranging from no inheritance tax, to the status quo in the US and the UK, to punitive taxes intended to radically redistribute wealth, to the total abolition of inheritances. We can have a reasonable discussion about changing the status quo at the margin without assuming the implementation of full communism.
They are inhuman, because you want to impose your will and your morality onto others. You are free to help as many people you want with your own wealth.
What would really rally popular opposition is the massive massive amounts of spending on propaganda (advertising, etc whatever you want to call it) to galvanize the American public to oppose something like this.
We live in a democracy, but elites still have enough say that something like an 100% inheritance tax is effectively off the table.
I think the problem could arise in the case of things like heirlooms or homes that have been in the family for years.
I think you might also need to write the law so that people could choose to inherit debt on the same terms as their parents. Otherwise, couldn't the bank demand a higher interest rate as a way to force someone off of their property? How does this sort of thing work currently?
Realistically, a law like this (though it would never happen) would be something along the lines of 100% tax on inheritances over 10 million dollars.
> I think you might also need to write the law so that people could choose to inherit debt on the same terms as their parents.
I assumed that this was already the case.
quick e: Yeah, seems like this is already law "Under federal law, lenders must allow family members to take over a mortgage when they inherit residential property"
People can't eat dollars. Dollars can't provide health care services. Better allocation of dollars will help in the near-term but the problem noted in TFA is there will eventually not be enough workers to support the non-workers.
It’s still possible for it to be a problem. Human skills aren’t entirely fungible. If technological disruption continues to increase in pace then we may reach a point where people’s education becomes obsolete before they even finish their degrees.
We could see large scale technological unemployment despite a shortage of labour in a set of ever-changing, highly specialized fields that people only end up in by an extremely lucky guess at the time they declare a major.
I am struggling to think of any part of my formal education, some of which occurred more than 20 years ago, which has been rendered obsolete by technical disruption. I don’t think technology is changing society that quickly.
It takes a whole different kind of reasoning to ponder the big picture. I'm not sure if anyone can do it. All I have is the clue that thinking from your own perspective never works. You get something like: I have money and kids, inheritance tax is bad. I lack money, the tax is good.
But to answer your question: Technical "disruption" is every instance of a thing making your job easier. It will require less skill/training and come with lower pay. Jobs with few, sometimes hard, decisions will benefit from technology. At some point the hard stuff is gone.
Perhaps your job was affected 0.1% in the last decade and the average is 5%. It would be just like 1 in 20 "jobs" vanished without anyone noticing it.
Dollars are how we account for net value provided, and their only value is in society’s collective agreement that tangible goods and services person A provided to B yesterday can be balanced by unlike goods and services A received from C today. They’re literally the debt that society owes the holder to compensate for past services to the society.
It’s not the only system of distributing goods and services to the populace. In theory, a centralized authority could evaluate everyone’s current need and provide it to them directly. This has gone disastrously wrong whenever it’s been tried in practice, though.
Dollars are just a mechanism for transferring wealth. Wealth is stuff, both in the here and now - land and assets - and in the future - wealth-generating machines like people and corporations.
There is no lack of food in the world; there might be a lack of beef, but not everyone needs to get to eat beef. There is no lack of land; there is more than enough land for everyone; it's just scarce in places that have high demand. The problem is distribution.
> There is no lack of food in the world; there might be a lack of beef, but not everyone needs to get to eat beef. There is no lack of land; there is more than enough land for everyone; it's just scarce in places that have high demand. The problem is distribution.
Legitimately baffled to see so many people in this thread asserting that this is not the case.
Also there will never be a lack of beef. This is economics 101 that people have a problem grasping. As the price of beef (or anything) goes up, this is a signal to entrepreneurs to make more of it, until the price goes down again. This is why prices are so important - higher prices lead to more supply, bringing prices down. Thus as demand for beef worldwide increases, producers will supply more of it to meet demand.
Production doesn't always increase as quickly or easily as economics 101 would have you believe. When there is a severe drought, there can be talk about towing icebergs but somehow it doesn't happen. Instead, people cut back on water usage.
You need to look into how production is actually done in each market to understand how quickly producers can respond to changes in demand.
(I'm not going to worry about beef, though, since there are good substitutes.)
I think that food is less of an issue since there is plenty of food other than beef that most people like.
However, although land itself may not be limited in the near term, land that people want is limited. Even if you have the same number of acres of land as the previous generation, if that land is less valuable, then your wealth and quality of life have gone down.
Wealth taxes might be the only way to avoid complete inequality in market-based systems [1]. Especially if the market is not growing for everyone. The wealthy kind of are an endless source of loot because the definition of wealthy is one relative to a median, so you'll either end up with everyone roughly equal in wealth (is that a bad thing?) or, more likely, over time new people will enter and exit the wealthy class due to various advantages and market dynamics so that there is an endless supply.
You should define what you mean by wealth. What does it mean that you will loot wealthy people? Will you eat shares of a company for breakfast? Will you burn cash in stove to warm your house?
Wealthy people control resources. You can take control from them, but it will not create more resources. One, fundamental resource is human labor. This resource will decline in proportion to the total human population whether it will be controlled by wealthy people or not.
Someone will need to physically do the work that needs to be done around old people. And there will be more old people, than there will be young people.
I'm not really following your question. The idea of a wealth tax is pretty straightforward. You take stock of a person's assets, take a percentage of that figure (say 1%) and send them a bill for that dollar amount. How they choose to pay that bill is entirely up to them - they can borrow against their assets, liquidate some of them, or use cash on hand. I don't really see how control of resources factors into the equation.
Control of resources factors into the equation, because dollars are intrinsically worthless. If money have intrinsic value, why not to print 1 000 000 000$ on a bill and give one to everyone? Suddenly everyone would become a billionaire.
Your example is less extreme, but it is still about redistributing control. Redistributing dollars redistributes control of what people do, and how other resources are allocated.
This is related to the article, because moving control of people does not create more people. As population will be getting older, there will be more old people that less young people will need to take care of. This is a fact.
You could argue that redistributing wealth will lead to more efficient control of resources, and so it will make it easier to provide care. But it is still fundamentally about control of diminishing resources and increasing needs.
BTW - I'm Polish and my government tries to literally pay people for having children. Around 30 000$ spread across childhood (take into account that Poles earn a lot less than Americans), and while it put a small dent in fertility rate, the number of children born in Poland is currently lower than before introducing that program.
Yes, it turns out that resources are actually the thing we need to sustain older people.
> Someone will need to physically do the work that needs to be done around old people.
Someone literally is already doing the work that needs to be done for old people. It's just that most of the wealth produced from that work goes to already wealthy people.
It's just that most of the wealth produced from that work goes to already wealthy people.
Exactly that work (social support, and healthcare for seniors) in total numbers consumes resources, not produces them. If it wouldn't be so there would be no need to fund it from taxes.
Frankly, it sounds like you rushed with a randomly chosen slogan to this thead.
You cannot destroy the incentive structure for economic activity (financial rewards) without catestrophic consequences. People don't pull start-up hours so that their neighbors can prosper, they do it for themselves. When you take away the possibility of great rewards, you destroy the incentive to add great value. See the entire history of collectivism.
The conversation is about what's fair incentive structure, correcting it does not amount to its destruction.
Also we do not require people to pull startup hours, and only a minority of the population ever does that. I dont see how that comes into this conversation.
I'm not sure what conversation you're participating in, but the parent comment was flippantly discussing the possibility of taxes so draconain that the GIDI coefficient would approach zero:
"The wealthy kind of are an endless source of loot because the definition of wealthy is one relative to a median, so you'll either end up with everyone roughly equal in wealth (is that a bad thing?) "
In the world advocated for in that comment, with aggressively averaged out income/wealth, there is no incentive to produce value above what is required to reach the average income.
It's a Rawlsian question of "how can we structure incentives such that everybody is better off?"
Now, the metric for "everybody is better off" is still an open problem, but there seem to be near pareto optimal steps we can take, like a high threshold wealth tax.
A 2% wealth tax above a few hundred of millions of dollars doesn't destroy the incentive structure for economic activity, it is disingenuous to suggest it would.
I wouldn't say destroy, but it definitely distorts things and I would prepare for some unintended consequences. For example, it incentivizes those taxed by such a scheme to become citizens of low tax countries like new zealand where there is no wealth tax and even no cap gains tax, renounce their US citizenship, and move there. Peter thiel for example recently got a new zealand citizenship likely to prepare for such an event.
"New policy will have unintended consequences" is a pretty unassailable position and of course not one I disagree with. I don't think you can say apriori that it would cause more harm than good though.
I'm sure that gimmick-y things to avoid wealth redistribution can be legislated on as they have been in the past.
I used to be a chef. In one situation I was payed dividing the number of patrons by number of cooks to cook for 40 people a night. In another situation I payed the same cook for 4 wealthy people on a yacht. It isn't hording. It is how the money is spent.
One owner of a yacht was on the board of his alma mater. The school was required by law to spend equally on women's sports as men't sports. The school had to invest in sports fields which were expensive. He complained about it. Later I worked on a yacht of a person who grew grass. During this time when the schools were required to increase the size of their fields he made a fortune. There are just winners and losers.
But cooking for 40 or 4 are pretty much the same from a labor perspective at that size because recipes scale to 10x easily.
Given that the gap between the rich and poor as a share of GDP has been growing for quite some time, it kind of suggests the rich already do have a "magical, endless source of loot".
> The wealthy aren’t a magically endless source of loot.
True. But that's how they've been treating folks with less advantage since time immemorial. Which tends to work until the exploitation becomes too egregious and lower classes implement a head tax on the wealthy.
Are people not aware how large wealth inequality is at this point? A small marginal wealth tax would generate just absolutely massive amounts of revenue because that is where most money is locked up, not in people's salaried income.
I think it's very revealing that your argument assumes "the wealthy" are a class completely distinct from everyone else, without new people becoming wealthy all the time. Of course, nobody ever admits that they support such an arrangement, even as they oppose the primary means of preventing it.
The other big unknown is what happens to prices when population starts growing.
Much of investing common wisdom is based on the assumption of a steadily growing population. The reason land prices generally rise is because there is a growing number of property buyers chasing a fixed amount of land; this means that the higher-income buyers buy up the land and the overall price rises. The reason stock prices rise is that there are a fixed number of oligopolist markets in the economy (competitive markets like restaurants & hairdressers rarely take investment), and an ever-increasing number of savers looking to earn a return on their money. If you start shrinking the working-age population, the price of land falls dramatically (most people end up inheriting a house from their parents; if they don't, there are several people that inherited multiple houses that they have no use for and are looking to convert into cash). The bargaining power of labor increases dramatically, pushing down corporate profits, but it also means fewer buyers for capital stock and more people trying to sell it to meet their daily existence needs.
The last time this happened (in the wake of Black Death, where 30% of the world's population died), the social system that had been in existence for a millenia collapsed. Serfs were able to demand better wages and working conditions for their labor. Increased bargaining power led to the guild system of the early Rennaissance. Increased saving power led to systems to manage pooled capital (like fractional-reserve banking and the corporation) and to the rise of the mercantile and capitalist classes. The big losers were the landed aristocracy, who found that the land they owned just wasn't worth as much in this new world.
The problem that I see is that in many situations the pie cannot grow or its growth rate is limited. The most obvious example to me is property in major, metropolitan cities in the US.
Wealth taxes are just going to be another way for the top 0.1% to fleece the rest of the top 10% or top 50%, because the rich and powerful will always change the rules to benefit them and to hide their assets.
I think the answer is somewhere in wealth taxes, which are much harder to implement effectively than income taxes, but will be necessary for redistribution in a world with static or declining incomes.
To put that into context with population pyramids, to support the old people, young people will need to get a bigger slice of the pie. That means less wealth being locked into untaxed distribution schemes that pass down generationally, whether it's trusts or corporations.